by Robert Fairlie
The following is a written interview with Robert Fairlie, author of “The impact of COVID-19 on small business owners: Evidence from the first three months after widespread social-distancing restrictions,” which can be downloaded for free here. Fairlie’s work has been cited in a number of media outlets including The Washington Post, The New York Times, The Wall Street Journal, and many more.
The following section is a Q&A with Dr. Fairlie
- Can you (briefly) summarize the key findings of this paper?
On March 19, 2020, the State of California imposed shelter-in-place restrictions with New York State following the next day. By early April most states imposed social distancing restrictions that closed “non-essential” businesses and added to consumer health concerns in the emerging pandemic. Using CPS microdata, I examined how COVID-19 impacted American small business owners in mid-April 2020—the first month to capture these changes. The number of working business owners plummeted from 15.0 million in February 2020 to 11.7 million in April 2020, the largest drop ever (the entire Great Recession only resulted in a drop of 5 percent). Losses by gender, race, and immigrant status were especially severe. African-Americans experienced the largest losses—41% of active business owners. Latinx also experienced major losses—32%. Immigrant business owners suffered a 36% drop, and female business owners suffered a drop of 25%. The concentrations of female, black, Latinx, and Asian businesses in industries hit hard by the pandemic were partly responsible for why losses were higher for these groups than the national average losses. Extending the analysis into the second and third months following widespread shelter-in-place restrictions — May and June 2020 — I find partial rebounds in both months. But, the disproportionate impacts from COVID-19 by gender, race, and immigrant status lingered into May and June. African-Americans continued to experience the largest losses, with 26% of active business owners still not active in May and 19% not active in June.
- What aspects of the data did you find most striking or surprising?
I found the loss of 41 percent in African-American active business owners as most surprising. These losses were severe and worse than I expected.
- Your previous work included research on entrepreneurship, racial and gender inequality, and labor economics. What aspects of your previous work have most informed your understanding of the impact of Covid-19?
In previous research, I have explored the link between racial inequality in business outcomes and broader racial inequality. In a series of papers, I have used various datasets to study the causes of racial and ethnic disparities in business ownership, formation and outcomes focusing on theoretical constraints limiting productivity and causing inefficiencies in the economy. In more recent work, I examine potential barriers created by human capital, wealth, demographic, geographic, and industry constraints for each group using the same dataset that I used to study COVID-19 impacts, the CPS. I find that low levels of wealth contribute to why blacks and Latinos have lower business ownership rates, and high levels of wealth increase Asian business ownership rates. Low levels of education contribute to why blacks and Latinos have lower business income, and high levels of education increase Asian business income.
- In July 2020, your research was cited in a Senate bill promoting investment in minority-owned businesses. What policy changes would you ideally like to see as a result of your work?
I think that it’s important that we continue to support small businesses through the pandemic. The consequences are clearly not over and more financial support is needed to prevent a large round of permanent closures.
- What avenues do you hope to pursue with future Covid-19 research, or do you hope that other economists will pursue?
I am planning on studying how PPP funds were distributed across minority communities. I’m also planning on studying the losses of small businesses in terms of sales. My work currently focuses on business owner activity and not on sales. Sales losses especially among restaurants, could be severe.